Chapter 1 Starting a Proprietorship Changes That Affect

Chapter 1 Starting a Proprietorship: Changes That Affect the Accounting Equation Identify service businesses. Analyze sole proprietorship with the advantages and disadvantages. State the Accounting Equation. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning

2 Competency: Understanding the Accounting Cycle for a Service Business n Objectives: n 34 Describe the purpose of accounting and the role it plays in the global economy. n 35 Demonstrate the effects of transactions on the accounting equation. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning LESSON 1 -1

3 Chapter 1 Objectives n Define accounting terms related to starting a service business organized as a proprietorship and to changes that affect the accounting equation. n Identify accounting concepts and practices related to starting a service business organized as a proprietorship and to changes that affect the accounting equation. n Classify accounts as assets, liabilities, or owner’s equity and demonstrate their relationships in the accounting equation. n Analyze how transactions affect accounts in an accounting equation. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning LESSON 1 -1

4 What is Accounting? n Accounting – planning, recording, analyzing, and interpreting financial information. n Accounting system – a planned process for providing financial information that will be useful to management. n Accounting records – organized summaries of a business’s financial activities. n Financial statements – financial reports that summarize the financial condition and operations of a business. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning LESSON 1 -1

5 n Service business – a business that performs an activity for a fee. n Proprietorship/Sole Proprietorship – a business owned by one person. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning LESSON 1 -1

6 BUSINESS STRUCTURES Forming and Dissolving a Proprietorship Advantages Disadvantages n Ease of formation. n Limited resources. n Total control by the owner. n Unlimited liability. n Profits that are not shared. n Limited expertise. n Limited life. n Obligation to follow the laws of both the federal government and the state and city in which the business is formed. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning LESSON 1 -1

7 n Asset – anything of value that is owned. n Equities – Financial rights to the assets of a business. n Liability – an amount owed by a business. n Owner’s Equity/Capital – the amount remaining after the value of all liabilities is subtracted from the value of all assets. n Accounting Equation – shows the relationship among assets, liabilities, and owner’s equity. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning LESSON 1 -1

8 THE ACCOUNTING EQUATION CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning page 8 LESSON 1 -1

9 DEFINE TERMS REVIEW page 9 In a Word Document. Save. AS: Chapter 1 Terms. Your. Name n n n n accounting system accounting records financial statements service business proprietorship asset n n n equities liability owner’s equity accounting equation ethics business ethics CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning LESSON 1 -1

10 Exit Ticket for Chapter 1 -1 In a Word Document, Save. AS: Chapter 1 -1 AYUYour. Name Drop a copy in my In. Box today before you leave! 1. What is accounting? 2. Give two examples of service businesses. 3. What is a proprietorship and explain advantages and disadvantages? 4. State the accounting equation. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning LESSON 1 -1

11 Chapter 1 -1 Assignments Complete on Aplia n Work Together 1 -1 n On Your Own 1 -1 n Application Problem 1 -1 CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning LESSON 1 -1